Thursday’s Vital Data: Delta Airlines, United States Steel and Roku

Options activity provides a look at expectations on DAL, X and ROKU stock

U.S. stock futures are circling unchanged this morning after roaring back from a sharp drop last night. Uncertainty concerning the trade talks took a big bite out of futures after the bell yesterday, but the losses have all but disappeared.

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Ahead of the bell, futures on the Dow Jones Industrial Average are down 0.11%, and S&P 500 futures are down by 0.06%. Nasdaq-100 futures have shed 0.05%.

Wednesday’s rally lit a fire under call trading. The CBOE single-session equity put/call volume ratio plunged to 0.58 and is closing in on a new one-month low. Meanwhile, the 10-day moving average finally curled over, falling just under 0.74.

Options activity was a mixed bag on Wednesday. Delta Airlines (NYSE:DAL) saw strong call activity ahead of this morning’s earnings report. United States Steel (NYSE:X) slipped to a multi-year low, notching a notable distribution day. Finally, Roku (NASDAQ:ROKU) shares are coming back from the dead, aided by an analyst upgrade.

Let’s take a closer look.

Delta Airlines (DAL)

Turbulence rocked Delta Airlines shares starting in August and the company has been losing altitude ever since. This week saw a rickety four-day bounce carry DAL stock into this morning’s earnings announcement, but the gains are being completely dismantled in pre-market trading.

Not that the quarterly report was all that bad. The company reported earnings per share of $2.32 which bested analyst estimates of $2.26. Its top line grew 5% versus the year-ago quarter to $12.6 billion and fell just shy of estimates. Additionally, Delta’s forecast for fourth-quarter earnings came in at $1.20 to $1.50. The Street was looking for $1.51 a share.

DAL is set to open down 4% near $51.75 which is a horizontal support zone. If it fails, then a move toward $48.70 is likely.

On the options trading front, traders favored calls ahead of the number. Activity swelled to 346% of the average daily volume, with 79,851 total contracts traded. Calls drove 60% of the sum.

The expected move on earnings per options pricing was $2.02 or 3.7% so this morning’s 4% whack falls just outside of the forecasted gap. Nonetheless, I’m chalking up this outcome as a tie between volatility buyers and sellers. Neither party will come out with a big win at the open.

United States Steel (X)

Unites States Steel fell to a three-and-a-half year low yesterday amid heavy volume. Not that weakness is anything new, mind you. X stock has been a serial underperformer this year and now boasts a 45% year-to-date loss. Its earnings have deteriorated along the way and bears have dominated for so long that rally attempts at this point are highly suspect.

If you’re a bottom fisher, good luck with X. You’re going to need it. Or, better yet, cast your lines elsewhere.

On the options trading front, puts edged out calls in popularity. Total activity zipped to twice the average daily volume, with 125,609 contracts changing hands. Puts accounted for 51% of the take.

Implied volatility has officially pushed to its highest levels of the year at 80%. Premiums are pricing in daily moves of 51 cents. If you’re an options buyer, consider doing a spread instead to offset the elevated cost.

Roku (ROKU)

Roku shares soared 9% Thursday, reclaiming some of its former glory, after Macquarie upgraded the maker of streaming media players and raised its price target from $110 to $130. The shift was accompanied by glowing comments surrounding the company’s growth potential. Over the next three years analysts forecast Roku’s active subscriber count could balloon from 31 million to 70 million.

Since last month’s wicked beatdown, ROKU stock has been slithering sideways. Wednesday’s pop cleared short-term resistance and completed a rounded bottoming pattern. A push toward the 50-day moving average at $128 is now a real possibility.

On the options trading front, calls were the hot ticket. Total activity ticked higher to 131% of the average daily volume, with 271,956 contracts circulating on the session. 62% of the trading came from put options alone.

The demand surge lifted implied volatility to 88% or the 71st percentile of its one-year range. Premium sellers will be happy to note this is the highest level since early-August.

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here

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